E-commerce report: Cybermeals takes bite out of online dining

JenniferCollins

} Cybermeals: Meals by numbers Seattle company hopes online dining is as easy as 1-2-3 By Jennifer Collins, CBS MarketWatch Last Update:

SEATTLE (CBS.MW) --Cybermeals of Seattle is trying to take a bite out of the online meal distribution industry.

The company has signed up more than 25,000 restaurants in 30 markets across the United States during the last year, making it the largest service of its kind in the world. The company is creating an online network of restaurants extending from metropolitan areas to the suburbs, where hungry users can order from their favorite eateries with a few keystrokes.

It sounds easy enough, but analysts are questioning whether ordering food online is the same as ordering other products online.

"I don't think it will see the same kind of success as the book and the (compact disc) market," said Nicole Vanderbilt, director of digital commerce at Jupiter Communications. "There is no real incentive for (consumers) to order through the Internet."

While consumers use the telephone more readily than the Internet when ordering meals, Cybermeals is betting that will change if the Web becomes as ubiquitous and accessible as television. When the time is finally right, Cybermeals is planning to cash-in on the so-called "home meal replacement" market. Last year, Americans dropped $207 billion in restaurants, the Technomics research group reported. About half of those orders were taken-out or delivered.

Cybermeals breaks bread with AOL, others

Until tomorrow is here, Cybermeals has positioned itself to ward off competitors. The company invented the software it solely distributes to send messages between users and restaurants, and it has exclusive multimillion dollar deals with AOL (AOL)
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, Yahoo! (YHOO)
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, Excite and Lycos. In the last year, Cybermeals, which lower-cases its name, also formed alliances with large restaurant chains, including Papa John's Pizza and PacPizza LLC. The latter owns 148 Pizza Huts throughout the Northwest and has partnered with Take Out Taxi, the largest delivery service across restaurants in the U.S.

For the small restaurant owners, Cybermeals may not provide sweeping benefits. The $400 start-up fee and the 5 percent to a 15 percent cut that Cybermeals takes on each meal ordered through its site means a small profit margin. When many online restaurants are also being listed for free in several online services, paying for Web publicity is less attractive.

Cybermeals' management is tight-lipped on questions about its financial success. The privately held company won't provide earning figures but will say that some 200,000 users have registered with Cybermeals and 20 percent to 30 percent actually order

But is Cybermeals trying to provide an answer to a problem that doesn't exist? "I don't think (meal ordering) is necessarily a problem on the consumer side," Vanderbilt said.

Coupled with the relative sluggishness of most Web connections, Vanderbilt says many consumers will resort to old-fashioned dialing. To create incentives, Vanderbilt recommends that the meal ordering service use coupons to entice users.

Cybermeals' management, however, points out there are already major advantages to the Web over traditional yellow pages. Consumers may easily browse through several menus, reading descriptions and comparing prices, in addition to downloading photos of various dishes from some of the restaurants, Cybermeals CEO Bill Jesse said.

"It's a much more complex environment that lends itself to a visual medium" said Jesse.

Cybermeals has made inroads with major restaurants, which scale better with the privately held company's business model. Because of their size, chain restaurants have better coverage in multiple regions, which offsets start-up costs. Cybermeals also helps these restaurants sell to new markets.

"It's a great way to extend the brand's reach," said Louis M. Romanus, president and chief operating officer of PacPizza. "It was another way to get new sales instead of just getting orders another way."

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